Friday, August 9, 2024
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The Impact of the Universal Service Fund
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The Universal Service Fund is a $8 billion decades-old mechanism created by Congress in 1996 to support vital communications investments where the marketplace falls short: connecting schools and libraries to high-speed internet; helping rural hospitals adopt telemedicine; ensuring low-income households have basic communications services; and investing in broadband in communities that need it most. The Fifth Circuit Court of Appeals recently held that the current administration of the Universal Service Fund is unconstitutional. Why is the Universal Service Fund so important?
- Connecting Schools and Libraries (E-Rate Program): From 2022-2024, 106,000 schools and 12,597 libraries received $7,020,502,347 for broadband connectivity and internal connections.
- Broadband for Health Care Providers (Rural Health Care Program): From 2021-2023, 16,080 health care providers received $1,621,136,341 for connections.
- Basic Phone and Internet for Low-Income Households (Lifeline Program): In March 2024, 7,596,720 subscribers received discounted phone and/or internet service.
- High-Speed Internet in Hard-to-Connect Communities (High-Cost Program): In 2023, carriers nationwide received $4,263,186,064 to connect households in the most rural communities.
The Fifth Circuit Court of Appeals threw federal broadband policy into chaos recently by declaring the Universal Service Fund unconstitutional. The decision threatens to shut down the Federal Communications Commission’s longstanding system of collecting fees from telecommunications customers to subsidize rural broadband deployment and Internet access for low-income households, schools, and other programs. For years, policymakers have acknowledged the need to overhaul the USF because of its ballooning fees, potential for waste, and outdated priorities. Now Congress has a clear mandate to reallocate funding to vital broadband programs like the Affordable Connectivity Program (ACP), while eliminating outdated and redundant initiatives. A reformed USF should turn the focus from infrastructure deployment to digital inclusion and affordability, and Congress should directly appropriate the funding for broadband programs. The Fifth Circuit has put up a roadblock for current universal service efforts, but it was time to change course anyway. By enacting targeted reforms, federal broadband policy will be more sustainable and effective than it was before.
[Joe Kane is director of broadband and spectrum policy at the Information Technology and Innovation Foundation.]
Consumers and policymakers always care about broadband prices. The issue is of particular interest to policymakers now that the Affordable Connectivity Program (ACP) has ended and as states try to figure out what the “affordability” requirements of the BEAD grants mean and how to implement them. Such analysis should begin with an understanding of current prices and how they have changed. This analysis uses three sources to consider the cost of broadband to consumers: the Federal Communications Commission’s Urban Rate Survey (URS), the U.S. Census Bureau of Labor Statistics (BLS) internet service price index, and the BLS Consumer Expenditures Survey (CES) internet access expenditures. Like many goods and services, broadband prices are complex because they are affected by so many factors, both on the supply and demand sides. The prices of several tiers continue to decrease, but at the same time some have increased, with some evidence that in recent years internet access prices may be increasing faster than inflation. One or two years does not necessarily mean a permanent change in a trend. Indeed, price increases above inflation for the past two years may not be surprising given that overall inflation was about three times as high as that for internet access from 2021 to 2022. Additionally, with the end of the Affordable Connectivity Program, many providers have announced lower prices of plans available to low-income consumers. We should expect to see these decreases reflected in future price indices and average prices.
Cable companies seem to have turned the corner from continually gaining customers to now losing customers. This is a consequence of increased competition from fiber overbuilders and FWA cellular wireless. In the first quarter of 2024, the sale of FWA cellular slowed down for T-Mobile and Verizon, from 929,000 to 759,000 in the first quarter. But FWA still counts for practically all of the net broadband gains for the quarter. Experts are predicting a much smaller number of total net customer additions for 2024, which is due to two issues. First is the lower number of new housing startups due to continued high interest rates. There is also a general sense that the entire industry is finally reaching maturity.
Library Wi-Fi hotspot lending programs (via the Federal Communications Commission’s E-rate program) are a complement to broadband providers and permanent connections at home—not a replacement for those connections, said Larra Clark, Deputy Director of the American Library Association’s (ALA) Public Policy and Advocacy Office and Deputy Director of the Public Library Association. Library broadband programs, Clark contended, are intended to provide connectivity—whether in the library and at home, via Wi-Fi hotspots—primarily to those who cannot afford their own connections or who only have access to poor service.“It feels like an ‘all hands on deck’ moment right now. That includes libraries and schools, providers, national funders—we have the opportunity to collaborate to increase awareness and confidence in using the internet, and all that it can enable for folks.”
The Department of Commerce’s National Telecommunications and Information Administration (NTIA) has approved Wyoming’s Initial Proposals for the Broadband Equity, Access, and Deployment (BEAD) program, a cornerstone of the Biden-Harris Administration’s “Internet for All” initiative. This approval enables Wyoming to request access to funding and begin implementation of the BEAD program. Wyoming was allocated over $347 million to deploy or upgrade high-speed Internet networks to ensure that everyone has access to reliable, affordable, high-speed Internet service.
The Michigan High-Speed Internet (MIHI) Office's Digital Equity Plan was finalized in March 2024. Four months later, on July 18, the National Telecommunications and Information Administration (NTIA) awarded Michigan over $20 million from the State Digital Equity Capacity Grant Program for implementing this plan. Among other efforts, Michigan plans to use the funding to implement its Inclusive Training, Technology, and Equity Network (MITTEN) which includes a robust statewide Digital Navigator Network that will disseminate information from state agencies pertaining to online accessibility of services, new opportunities for workforce or education, and affordable Internet service plans and devices. What follows is the timeline for how MIHI will develop this and other programs using its funding from the Digital Equity Act.
Kendall County (IL) wanted to deliver a better broadband experience to its residents. So, it reached out to the local incumbent providers which reacted with smugness and arrogance. The county was so put off by the incumbents that it instead pursued a public-private broadband partnership. Many of the county’s residents have been dissatisfied with their selection of broadband providers, which include AT&T, Comcast and Metronet. So, the county decided to put out a request for proposal (RFP) for a private company to bring some broadband competition to the area. Via the RFP process, the county selected Pivot-Tech in August 2023 to build a fiber network. The first order of business for Pivot-Tech was to decide how to finance the new network. The company set up a non-profit organization as the project company, which in turn offers a tax-free revenue bond. Funding through a tax-free revenue bond not only thwarts objections from incumbent providers, it also has other benefits for the community. The non-profit can use excess profits to either expand the network or return profits to subscribers to offset their bills.
In 2021 when the pandemic was raging, President Joe Biden led a bipartisan effort to pass the Affordable Connectivity Program as part of the Infrastructure Act so low-income families would have subsidized internet service. It was especially important to get low-income families hooked up since their children would need to do their schoolwork from home. But Congress let the funding expire in April 2024 without allocating more money so as of June 1, subsidized internet was no longer available. Pima County (AZ) is trying to track down as many of those households as possible to let them know, that even if they’ve lost the subsidy, there are low-cost plans available if they qualify. And with school just around the corner for many of these families, now is not the time to lose the internet connections their children depend on.
Between 2019 and 2021, the number of Ohioans working from home tripled, demonstrating the vital function of high-speed internet services like broadband in Ohio’s workforce. Additionally, remote learning, telemedicine and other online programs continue to thrive well after the pandemic. A 2022 analysis by The Ohio State University, however, indicates over 1.4 million Ohioans continue to lack residential access to fast, reliable high-speed internet service. The Ohio Chamber has long advocated for broadband expansion. Several policy initiatives have placed Ohio on a trajectory to dramatically expand broadband infrastructure, including the Ohio Broadband Strategy, which created the BroadbandOhio office under the Ohio Department of Development. Another pivotal step was the enactment of the Ohio Residential Broadband Expansion Grant Program, which provides state grants to facilitate construction of residential high-speed internet service to unserved households across the state. With remote work on the rise and the high demand for internet services in everyday life, it is essential for every Ohioan to have access to high-speed internet and broadband services.
[Steve Stivers is the president and CEO of the Ohio Chamber of Commerce.]
Money is beginning to really flow into the U.S. fiber ecosystem, but the dollars are coming from a somewhat unexpected source—middle-mile and long-haul fiber projects. Case in point: the Alabama Fiber Network (AFN) struck a deal with Arista Networks to secure routing and switching equipment for its 6,600-mile open-access, middle-mile network. AFN also just recently announced that it selected Ciena as its optical networking vendor for the middle-mile project. AFN is a consortium of eight electric cooperatives that are building a sprawling middle-mile network to support other service providers and community anchor institutions. Ultimately, the middle-mile network will help connect all the last-mile networks that will be built with Broadband Equity, Access and Deployment (BEAD) funds. The network will reach all 67 counties in Alabama.
Almost all internet traffic—including Zoom calls, movie streams, emails and social media feeds—reach us via high speed fibre optics laid on the ocean floor. These are the veins of the modern world, stretching almost 1.5 million km under the sea, connecting countries via physical cables which funnel the internet through them. That the data that powers financial, government, and some military communications is traversing cables not much thicker than a hose pipe and protected by little more than the seawater above them, has in recent years become a cause of concern for lawmakers across the world. The targeting of internet cables is a weapon that Russia has long held in its arsenal of hybrid warfare.
Benton (www.benton.org) provides the only free, reliable, and non-partisan daily digest that curates and distributes news related to universal broadband, while connecting communications, democracy, and public interest issues. Posted Monday through Friday, this service provides updates on important industry developments, policy issues, and other related news events. While the summaries are factually accurate, their sometimes informal tone may not always represent the tone of the original articles. Headlines are compiled by Kevin Taglang (headlines AT benton DOT org), Grace Tepper (grace AT benton DOT org), and Zoe Walker (zwalker AT benton DOT org) — we welcome your comments.
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